Quantifying the impact of cost-based incentives on the performance of building projects in the United States

Construction projects often suffer from cost overruns and time delays. Incentive/disincentive (I/D) provisions are contracting strategies that encourage stakeholders to complete a project with optimal cost and time. During the last decade, incentive mechanisms have gained momentum in numerous industries and are becoming increasingly adopted in building projects. While few studies have investigated the effect of incentives on the construction industry, mostly using qualitative research approaches, the current study adopted a quantitative approach to measure the performance impacts of cost-based incentives in the U.S. building construction industry. First, the paper summarizes the previous research on the topic, including the benefits and types of incentives. Second, a survey conducted to collect data from more than 30 U.S. building projects is discussed. Third, the statistical methods used to analyze the collected data and test the significance of observed differences in performance between the two data sets, projects with incentives and projects without incentives, are presented. The results show that cost-based incentives can reduce cost and schedule overruns by 5.3 and 8.4%, respectively. This paper contributes to the growing body of knowledge on incentives; it provides empirical findings about the impact of incentives on the cost and schedule overruns of building projects in the United States.